The banking regulator, Reserve Bank of India has directed banks across the country to keep a tab on credit flow to companies which have outstanding statutory dues like salaries paid, and Employees Provident Fund (EPF) contribution.

The move is said to safeguard the interest of banks and prevent them from ‘erosion of collateral' given to the bank. the new guidelines have been framed under the Banking Regulation Act, which protects the interests of banking sector, and depositors.

"To safeguard the interests of lending banks, they are advised to obtain a certificate from the borrower's auditors on an annual basis that all statutory dues, including EPF dues, have been paid by the borrower," read a RBI letter addressed to bank chiefs.

RBI said that retrieval of such accounts can result in loss of collateral to the bank. the banks are trying to keep a check on such companies, but banks sometimes pass such loans because of the healthy financials of the company.